tv Nightly Business Report PBS March 27, 2015 6:30pm-7:01pm PDT
this is "nightly business report" with sue herera. ready or not, fed chair janet yellin said a rate hike is likely this year even as economic growth remains cool. profit picture and it's not pretty. just how weak will corporate earnings be and what does it mean for investors? market monitor. a list of stocks he says could deliver double digit returns for you over the next year. all that and more tonight on "nightly business report" for friday, march 27th. good evening. gradual and conscious. that's how federal reserve chair janet yellin described the path ahead for interest rates that's become one of the biggest guessing gapes on wall street. in prepare for a conference call by the feder reserve bank of san francisco, yellin said it
all hinges on the economy and the data. >> i'm cautiously optimistic in the context of moderate gross and aggregate outwardly spending labor market conditions are likely to improve further in coming months. in particular and despite the somewhat disappointing tone of recent retail sales data i think consumer spending is likely to expand at a good clip this year. >> and one number yellin is watching closely, gross domestic product. today the commerce department on fourth quarter gdp. the broadest measure by the economy expanded by 2.2%. hampton pearson has more. >> reporter: harsh winter we send a slowdown in major west coast ports and the strong dollar not only drives on the economy ae end of the year but continue to take their toll in the first quarter. total corporate profits dropped more than 8% last year the
biggest decline since 2008. that decline accelerated in the fourth quarter, as earnings from multinationals were impacted by the strong dollar. after tax corporate profits fell $57 billion in the fourth quarter versus a $52 billion increase in the previous quarter. corporate profits from outside the u.s. had a decrease of $36 billion versus a $16.5 billion increase in the third quarter. and the dollar gained nearly 8% against the currencies of the main u.s. trading partners in the last six months of 2014. >> some pullback would be expected. we're not terribly concerned about it going forward especially given the fact it's a transitory nature to that dollar. >> reporter: in contrast the benefits of lower energy prices may finally be showing up in consumer spending. the 4.4% increase at the end of last year was the fastest pace in nine years. but record cold weather kept
millions of consumers at home in the first quarter of this year and economists say many households opted to hold on to the bulk of their savings from lower gasoline prices. >> it takes a few months of these lower gasoline prices sticking for people to become convinced, okay this is a permanent drop. this is not just some volatility like we saw in 2008 when gas prices went down and pretty quickly ran back up. >> slower economic growth and profit data is more ammunition for economists and fed watchers who believe monetary policy makers will delay raising interest rates until later this year. >> the fed is still the single most important factor for the stock market and i don't think that fed will tighten anytime soon. >> reporter: the next payroll update one week from today when the labor department delivers the march jobs report. for "nightly business report," i'm hampto steve liesman is with us now to talk more about the fed chair's speech this evening and economic growth. as i heard the chair, i heard
her rather bullish about the u.s. economy, but concerned, did she not miss the moment to raise interest rates? not to be too late to do so? >> those are all the same things tyler. she's bullish on the economy given what's happening right now, the softness of the economy. she said it will come back and expects it to come back. she expects the labor market to remain strong. what i thought she did was say, you know don't be too complacent on when we start, by when we start, you can be somewhat complacent. we will be very gradual. very important she mentioned sweden and japan two countries that have tried to leave zero interest rates, put their tail between monetary policy legs and went scurrying back to zero. >> steve, she mentioned inflation and as i read it she mentioned the fact that they like some more inflation in the economy but inflation is not going to be the only measure by which they judge when to raise rates. >> not only that sue, but said what i think is for the first time.
i have to go back and look at all the things she said they're willing to raise rates even if core inflation is not rising. >> exactly. >> even before the fed reach it is 2% target. i think the way to think about this is what she's saying is she will not make the perfect inflation be the enemy of the good. the end of the day, what they're going to do is raise rates in part because i hear her saying the risk of being too late while there's still less than being too early have risen nonetheless and want to be very vigilant they don't end up hiking too early. >> the perfect labor market of the good by the same token. it really jived with what vice chair fisher said i guess to you and others earlier this week. when we start to rise don't expect it to be a lock step quarter point every meeting. >> right. they want to keep the market guessing a little bit. they don't want to be a predetermined path. the era of predetermined path of absolute guidance from the fed, that's done. that was part of the financial
crisis. that was part of this idea of we want to tell you what's going to happen next. we're over that. we're into a very new and somewhat historic raer. >> thank you so much steve liesman. stocks snap a four day losing streak but despite gains, posted biggest losses since january. posted 34 points to 17,712. nasdaq tacked on 27 and s&p 500 gained 5. for the week all three indexes were down more than 2% with the nasdaq getting hit the hardest. gdp report showed a big drop in corporate profits in the fourth quarter of last year at least by one measure. as we approach the end of the first quarter things aren't looking a lot better. bob pisani has more now from the new york stock exchange on the profit outlook. >> reporter: as we enter earnings season for the first quarter in the next few weeks it's important to note that a higher percentage of companies have been saying their earnings will be below expectations as
some blame currency issues. some are just saying sales are sluggish. regardless earnings estimates coming down for weeks. now, everybody knows that for energy companies are going to be a debacle due to the decline in oil. expected to be down 63% in that sector but also expect earnings decline nts other sectors including materials, utilities, tell telecom and consumer staples. that's five of the ten sectors in the s&p 500 expected to show negative earnings growth. analysts currently expect the s&p 500 to have earnings down roughly 3% over the same period last year. this would be the first quarterly decline since the third quarter of 2009. that's the bad news. here's the good news. all the analysts are upset with this earnings recession, so they become very aggressive cutting their earnings estimate. and because of that my bet is that they're going to overshoot the mark. my bet is that we are probably bottoming in terms of earnings
cut and that the companiesl report results that are a bit better than expected. still, even in the best case scenario earnings will be close to flat for the first quarter and possibly the second quarter. that's a serious head wind when you have the stock market near historic highs. for "nightly business report," i'm bob pisani at the new york stock exchange. >> so what could a weak earnings season mean for the market and for investors? john mannily from wells fargo management. thank you. >> thank you for having me back. >> do you really expect it to be a weak earnings season? >> me and everybody else. it's pretty obvious they're going to be down. although they have a tendency to rise in the first couple of weeks of the quarter. we finish up the preannouncement period. that's generally the worst part of it. i tend to think they'll be okay. they'll be flat to down. i think this is probably close, bob had a good point. probably the worst we'll see. >> if you took energy out, would
the earnings picture be a lot better? >> yeah. no question about it. i'm not sure, it wouldn't be gr but it would be better than it is. obviously, energy is a big, it's a reasonably decent component, a big drop. there's no question, ear kind of sluggish. the dollar pretty strong. it looks like the second half of last year. a bit of an aberration cost by first half of last year. wasn't as strong as we thought. number one, i think e earnis aren quite as important on the six to 12 month basis with the fed and numb i think the earnings still rise. we have to get through this rough patch but the things that made them go up are still in place as far as i'm concerned. >> for the investor that has a longer term time horizon, if we do indeed see weakness in this market i assume you would encourage them to add to their positions. how do you think the market will take ternings season? >> if we get the sense things are better in europe and trading partners do better that's what
we need. it could look ahead. sometimes, we're looking right at now. sometimes we're looking at six months, sometimes we look at 12 months. usually when we get a sense of this is as bad as it's going to be we tend to look out further and i call that a positive. >> call me a polyya nah, john but i wonder whether a bad earnings report is a good thing because then the cops become easier to hit. >> set it a slightly different way and i think also the fed has got to be looking at this too. a connection between profits and economic growth and, you know, as you said earlier in the program, i'm sure janet yellin doesn't want to raise too early or late but which side of the angels are you on? >> on that note we'll leave it there. have a great weekend, john, and thank you for joining us. oil prices fell for the first time in six sessions despite a second day of saudi-led air strikes in yemen.
west texas intermediate off 5% brent tumbled as well. michelle caruso-cabrera now with more on the fighting in yemen where the battle lines are being drawn and on why investors are on >> reporter: the saudi arabia led coalition forces launched fresh air strikes against military targets in yemen's capital of sanaa. it's controlled by hewti rebels shia muslims. responded to air raids with anti-aircraft artillery that could be heard across the city. thousands of protesters gathered in the yemeni capital to show their support for the huti rebel group. alma ciera television associated with the rebels broadcasted the huge demonstration that took place after those attacks. the country's president, hadihu held the sunni muslim government wednesday as the hutis advance on stronghold in tn port of aiden.
appeared yesterday arriving by plane yesterday in riad according to saudi state tv. the military greatest concerns about oil supplies because saudi arabia is one of the greatest producers of oil. bill richardson the former energy secretary. >> whey worry about, this yemen conflict two things. a dramatic effect on oil prices if something goes bad for the sa what happens if the saudis start losing? >> the governor's second concern, a potential escalation to a wider regional conflict. foreign policy experts call this a proxy war. the government of yemen is sunni and supported by saudi rab ya. the rebels are shia and supported by iran. this is essentially now a war between saudi arabia. and also in syria, iraq and lebanon. the minister condemned the sidelines of the attack on the iran negotiation. >> they have to stop and
everyb has to encourage dialogue and national reconsideration in yemen rather than making it more difficult for the yemenis to come together. >> reporter: those nuclear negotiations highlight how even more complicated the situation in the middle east has become. the u.s. is negotiating with iran on its nuclear program. it's on the same side as iran in the battle against isis in iraq and syria and on the opposite side of iran when it comes to yemen in saudi arabia. for "nightly b michelle caruso-cabrera. as for where oil prices go from here the chairman and ceo of chevron said investors should brace for a volatile year. >> i think we'll see a choppy year in 2015. i believe prices will respond to physical things that are happening in the marketplace. and political events all around the world. over time i think market focuses. it's a choppy range in today.
>> to deal with the chop pinellas inchoppiness. still ahead, sue a triple stock you should hold for a year and a third for three and a third for five. a busy 24 hours in the nation's capitol. the republican controlled senate approved its budget along party lines in the early hours of the morning. second senator harry reid announced his plans to retire next year and third, banks are reportedly considering withholding campaign donations to senate democrats because of
senator warren's attacks on wall street. john harwood has been very busy today and joins us now with more from washington. we start with the budget. it was along party lines. what's the next step here? >> the house and senate sue vrks to try to reconcile their competing versions of the budget. if they can do that that will set the stage for them to make one last decisive attempt in both chambers to repeal obamacare. who will fail because president obama will veto it but they can get a vote in the senate that can pass what the majority if they can put their two budgets together. otherwise, the budget isn't that significant. it's a non-binding document and president obama has vowed to veto spending bills that carry out that budget which suggest it's in for a rough ride down the road. >> this is basically a dead letter either way. >> i think so but it will be significant if they get a unified budget house and senate. they'll have these expedited parliamentary procedures to
actually pass and put on his desk a bill repealing obamacare which will then veto. >> quick thought on harry reid. stepping down. he was going to face a tough fight. he did the last time he ran. does it change anything? >> yes. it puts a seat in play for the republicans. chuck schubert is going to succeed him as leader. harry reid endorsed him today. dick durbin, the chief competitorth race. we know a new york senator friendly with wall street will be the next democratic leader. the question is going to be do republicans and democrats or democrats hold the senate in 2017? harry reid's retirement makes it slightly easier for republicans to hang on. >> lastly banks reportedly withholding campaign contributions. attacks on wall street. how big a dent would that be if they carry that out? >> i don't think that's going anywhere sue. certainly with hillary clinton as the prospective nominee. she's friendly to wall street. i mentioned chuck schubert. i don't think you'll have
widespread protesting. elizabeth warren was just out this afternoon raising money off that threat calling on her supporters saying don't let us be bullied by the big banks. >> it is never a dull moment john. thank you so much. john harwood in washington. a $5 billion deal tops tonight's market focus. dow chemical and a spinoff and merge both of its chlorine business with olin corporation. the deal makes olin the largest producer of core alkali used in the textile and automotive businesses. the ceo said the deal was a no brainer. >> this deal structure is a win win win. dow shareholders win. olin shareholders win. the combined company becomes number one in their business and dow shareholders end up earning 55% of it so they get to participate in the new growth company. >> shares of both companies up strong today. dow chemical gaining and olin
higher by 14% to $31 even. blackberry surprised with a fourth quarter profit but revenues missed targets. the one time leader in the smartphone market say the plan to reinvent itself is mobile security for corporate government users is still on track. shares of black berry up nearly 2% to $9.46. finish line posted a decline in its holiday sales quarter and warned that profits may miss expectations for the full year but athletic apparel and shoe retailer managed to beat wall street estimates for the fourth quarter. the company said it will buy back 5 million shares. shares fell to $23.62. carnival earnings cruise thanks to higher and lower fuel prices. ordered nine new ships and rose to $47.12. intel reportedly in talks to buy the chip maker al terra. the deal for alter ra would be
intel's largest takeover ever. shares of alterra shot up to $44.39. intel climbed about 6% to 32 even. our market monitor tonight said he has a list of stocks that couldbuys rise double digits. the chief investment officer at global finance private capital. chris, welcome. good to have you with uls. let's jump into the stocks. i noticed i saw jd. i immediately thought of a product. i thought jack daniels. this is not jack daniels we're talking about. >> no jd is a chinese company. it's immune from the tantrums around the dollar and the northeast. look china is changing from an export economy to a consumer economy. and the best way to play that is through the internet and jd is like buying amazon six years ago. it has already 1800 delivery centers and 80 warehouses. i think they give alialibaba, a bigger cousin a run. >> you like an etf pure run
cyber security the symbol is hack and see like almost every day, we hear big and small corporations having to deal with cybersecurity issues. >> absolutely sue. there's no question that it pervades everything. even our own computers and cell phones and teslas and everything. i think the way to play that whole area is not to try to go out and buy a fire eye or palo alto networks but find something to take care of all the life cycle of the attack world. and to be able to do that if you can own a real package of securities you can get one of the hottest areas in technology without having to take that individual bet. >> you like guacamole, don't you, chris? your next choice is a grower of avocados. do you know y good kale stocks? >> kale is healthy too, but is great. if you look at earnings and
sales progression, they don't have to worry about the export business. mainly to the u.s. with avocados and tomatoes and other things. the best part of it is that it's now a health food conscious area and everybody says the good fat is in avocado f. you look inside the company and see growth in earnings and sales, you realize it's a little bit immune to maybe this blip we'll get with march quarter earnings. >> what about earnings and the market overall, chris? i know you invested with different time horizons and some of your holdings but are you still bullish on the market? >> i do. i think will be a front end loaded year just as your previous strategy said i think we'll see some skinned knees when finally the fed. here it comes. then they get over it. it will be like may and june of 2013 and then be beyond it. so i'm basically feeling we're more in a secular bull market
but i think we need to have a real connection. >> go have yourself a good avocado, chris. thanks a lot. have a good weekend. >> thank you. >> global financial private ca some crazy developments tonight in the high profile sexual discrimination suit we told you about earlier this week. a jury found venture capital firm kleiner perkins did not discriminate against former partner ellen pow but on the account dealing with retaliation it was found the jury only had 8 votes in favor of kleiner perkins. the problem? you need to have 9 jurors agree. the jury sent back to deliberate. a final verdict could come back later this evening. coming up as we continue americans are losing their thirst for diet soda and presenting big challenges for some very bi.
and here's a look at what to watch for next week. how much did people earn and spend in february? we'll find out on monday. tuesday, that's the deadline in the u.s./iran nuclear talks. it also marks the end of the first quarter and friday we get the march jobs report. the stock market is closed for good friday but the labor will release the report that morning. and finally tonight, americans' love of soda is fizzling. soda volumes down now for the tenth consecutive year and as sara eisen tells us diet soda is now leading the decline. >> reporter: if you find
yourself drinking less soda than you used to you're probably not alone. >> i think our generation drank a lot more soda but we don't. >> the sugar isn't as bad as art artificial. i used to get soda now i don't. >> i can't pronounce the ingredients so i'm not drinking it. >> reporter: dropped for the tenth year in a row and diet dropped more than full cals for the fourth straight year. coca-cola is far and away the sales leader but pepsi back at number two moving past diet coke for the first time since fwooin2009. >> consumers are moving from categories perceived as better for you to stuff that's actually good for you. >> reporter: consumers weren't buying more pepsi. sales down 2%. but it moved up in the rankings because the decline not as steep as the drop in diet coke sales down more than 6.5%. sales hit other diet sodas too. diet pepsi down more than 5%.
diet mountain due fellew fell 3%. coke co-da, 2%. diet coke performance is improving slightly but we have more work to do. some of that work includes using fewer artificial sweeteners. >> they have to come up with a natural sweetener. if they do that in both coke and pepsi as well as dr. pepper, they're working on that but trying to find something that's na tastes good that's been the real problem so far. >> reporter: sales of full calorie coca-cola up for the year. just barely. one tenth of 1%. coke's first year increase since 2000. energy drinks are giving sodas more competition these days. that's why the big boys coke pepsi and others are big players in the drink market. overall, beverage sales up last year but that was driven by the rise of bottled water. up 7% in 2014. in fact in terms of volume or sheer amount of units sold bottled water is set to outpace
soda sometime in the next two years. for "nightly business report," i'm sara eisen at the nasdaq in new york. >> we're both seltzer people. >> i drink a lot less of it today than i did in the past. more water. >> more water. that's it. we hope you have a lovely weekend. see you again on monday. that's "nightly business report" for tonight. i'm sue herera. >> and i'm tyler mathisen. have a great weekend, everyone. we will see you back
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